Keeping tabs on TNCs

New approaches to regulating business

How governments, civil society and businesses promote corporate social responsibility (CSR) and regulate the behaviour of transnational corporations (TNCs) has changed in recent years. Certain types of government regulation and corporate self-regulation are giving way to co-regulation and corporate accountability. The pros and cons of these approaches are the focus of recent work by the UN Research Institute for Social Development.

Co-regulation involves different individuals, groups and organisations working together to set standards and facilitate their implementation. NGOs often take the lead in such initiatives, which include:

• certification schemes for environmental management standards (ISO 14001), the Fair Labour Association and (SA8000) labour standards, and the Forest Stewardship Council (sustainable forest management)
• Global Framework Agreements between international trade union organisations and TNCs to apply standards throughout their global structure
• monitoring schemes linked to anti-sweatshop initiatives such as the Clean Clothes Campaign, the Global Alliance for Workers and Communities and the Worker Rights Consortium
• schemes emphasising dialogue and learning about good practice, including, the UN Global Compact, the Global Reporting Initiative, the Ethical Trading Initiative, and AA1000 (accountability).

While the scope and impact of such initiatives vary, they have addressed limitations of corporate self-regulation, including issues of labour rights rather than focusing simply on working conditions; of supply chain management, as opposed to remaining at the level of TNC affiliates; and of independent monitoring, as opposed to relying on internal monitoring or none at all. There are questions, however, regarding legitimacy and impact (see editorial).

There has also been a proliferation of international agreements, proposals and campaigns regarding corporate accountability - the idea that firms must be held to account and be penalised if they don't comply. Recent initiatives include:

• developing stronger OECD Guidelines on Multinational Enterprises (Organisation of Economic Cooperation and Development)
• a proposal for a European Union Code of Conduct for TNCs
• drafting UN Norms on the Responsibilities of TNCs and other Business Enterprises with regard to Human Rights
• proposals for a multilateral corporate accountability convention or organization.
• civil society campaigns such as Publish What You Pay, International Right to Know, and the Tax Justice Network
• new international laws to control the use and marketing of tobacco, pesticides and chemicals.

The emerging corporate accountability agenda is promising: voluntary and legal approaches can be combined; it pays greater attention to complaints procedures allowing stakeholders to detect, publicise, prosecute or deal with specific breaches of agreed standards; it addresses structural dimensions of underdevelopment relating to TNC activities, including corporate power and political influence, transfer pricing and tax avoidance. See 'Pay your taxes' article.

The key to success, however, is for governments and business communities to work with civil society groups to create the political environment and broad-based coalitions necessary to move the corporate accountability agenda forward.

Peter Utting
United Nations Research Institute for Social Development
Palais des Nations, 1211
Geneva 10
Switzerland
T +41 (0)22 9172951
F +41 (0)22 9175060
utting@unrisd.org

See also

UNRISD Conference News: Corporate Social Responsibility and Development: Towards a New Agenda? UNRISD, Geneva, 2004

Regulating Business via Multi-stakeholder Initiatives: A Preliminary Assessment by Peter Utting in 'Voluntary Approaches to Corporate Responsibility: Readings and Resource Guide', NGLS / UNRISD, Geneva 2002

Barricades and Boardrooms: A Contemporary History of the Corporate Accountability Movement by Jem Bendell, Programme on Technology, Business and Society Paper No. 13, UNRISD, Geneva, June 2004

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